Analyst Note| Dave Meats, CFA |
We have slightly reduced our fair value estimate for narrow-moat Cabot, to $23 per share from $24, after taking into account the proposed "merger of equals" with Cimarex. That reflects a premium of about 40% to the last close. The transaction is structured as a all-stock acquisition of Cimarex by Cabot, resulting in Cimarex shareholders receiving 4.016 shares of Cabot stock for each Cimarex share held. Cabot will absorb Cimarex's assets and debt, giving it a substantial foothold in Oklahoma and in the Permian Basin in addition to its core operations in the northeast Marcellus. The combined business will operate under a new name, which has yet to be determined.